India and the European Union announced a written agreement yesterday that puts more conditions on EU customs authorities before they can stop shipments of generic pharmaceuticals passing through Europe. No longer is the existence of an EU patent on passing generics sufficient cause to stop shipments. The agreement suspends a World Trade Organization dispute started by India last year.

According to India, the EU has committed to change its regional regulation 1383/2003 that led to seizures in 2008 of legitimate generics from India passing through the Netherlands and other European countries on their way to South America and Africa. The seizures had been initiated by European patent holders even though the shipments were in transit and not destined for European markets. The EU has already adopted a proposal for a new regulation, apart from the Understanding.

The two sides signed an Understanding that has not yet been made public. According to an Indian release, the Understanding provides principles for border enforcement of intellectual property in the EU, and the EU has agreed to adopt guidelines confirming the principles “with a view to give greater and immediate legal certainty for producers and traders.”

A key element of the Understanding is the core principle that “the mere fact that medicines are in transit through EU territory, and that there is a patent title applicable to such medicines in EU territory, does not in itself constitute enough grounds for customs authorities in any Member State to suspect that the medicines at stake infringe patent rights,” the Indian release said.

If there is adequate evidence of a likely diversion of medicines into the EU market, then EU authorities can have grounds for suspicion of infringement of IP rights.

India is the world’s biggest producer of generic medicines, which because of their lower price are considered essential for developing countries.

The WTO case brought by India in 2010 did not move past the consultation phase to formation of a panel, and the case is effectively suspended on the expectation that the principles in the agreement will be met, according to sources. The case is expected to be withdrawn when the EU has implemented legislation that addresses the concern.

Brazil also had filed a case against the EU, and is expected to follow India’s approach.

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